Citi Sued By Federal Home Loan Bank, Insurers On Mortgage Securities
Citigroup Inc. (C) and Bank of America Corp. (BAC) disclosed new lawsuits Thursday related to the business of originating and servicing mortgages.
In their quarterly earnings filings with the U.S. Securities and Exchange Commission, both banks said the Federal Home Loan Bank of Boston sued them in state court in Massachusetts, alleging misstatements or omissions in connection with mortgage-backed securities.
The FHLB is suing a long list of banks, including Ally Financial Inc., Capital One Financial Corp. (COF), Wells Fargo & Co. (WFC), Morgan Stanley (MS), several foreign banks, and McGraw-Hill Co. Inc. (MHP) for losses on its $5.8 billion investment in private-label mortgage-backed securities issued by 115 securitization trusts.
In a statement on its website, the FHLB said it seeks "various forms of relief including rescission, recovery of damages, recovery of purchase consideration plus interest" and legal costs.
Citi also said in its filing the Union Central Life Insurance Co., Ameritas Life Insurance Corp. and Acacia Life Insurance Co. are suing it in federal court in Manhattan. According to the complaint, the insurers are demanding unspecified recovery of damages from losses sustained during the financial meltdown related to mortgage-backed securities. A slew of other banks are mentioned in the suit, including Wells Fargo, Goldman Sachs Group Inc. (GS), Morgan Stanley, and several foreign banks.
Two Citi shareholders, William Fitzpatrick and Michael G. Brautigam, filed two separate suits last month in Manhattan's federal court against former and current directors of Citi, including Chairman Richard Parson and Chief Executive Vikram Pandit and former Treasury Secretary Robert Rubin.
Fitzpatrick is demanding the defendants pay Citigroup damages the bank sustained as a "result of the breaches of fiduciary duties" by the directors, according to his complaint. He is seeking to force the company's directors to take steps to avoid a "repeat of the damaging events" of the financial crisis, including botched foreclosure proceedings, oversight and controls, according to the complaint.
Citi said in its filing that it expects the assessment it pays to the Federal Deposit Insurance Corp. would increase by about $550 million a year. The bank's deferred tax assets, writeoffs it can use against future earnings, declined by $1 billion in the first quarter from the fourth, to $51 billion.
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